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A.M. Best Affirms Ratings of White Mountains Insurance Group, Ltd., Its Subsidiaries and OneBeacon Insurance Group, Ltd.

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A.M. Best has affirmed the financial strength rating (FSR) of A (Excellent) and the issuer credit ratings (ICR) of “a” of Atlantic Specialty Insurance Company (New York, NY) and its three U.S. reinsured affiliates, collectively referred to as OneBeacon Insurance Group (OneBeacon).

At the same time, A.M. Best has affirmed the ICRs of “bbb” and debt ratings of OneBeacon’s publicly traded parent, OneBeacon Insurance Group, Ltd. (OneBeacon Ltd.) (Hamilton, Bermuda) [NYSE:OB] and its intermediate holding company, OneBeacon U.S. Holdings, Inc. (OneBeacon U.S.).

Concurrently, A.M. Best has affirmed the ICR of “bbb” of the group’s ultimate parent, White Mountains Insurance Group, Ltd. (White Mountains) (Hamilton, Bermuda) [NYSE:WTM]. The outlook for all the above ratings is stable.

Additionally, certain indirect subsidiaries of OneBeacon Ltd. (containing the group’s run-off business) were placed under review in October 2012, as a result of their planned sale to Armour Group Holdings Limited (Amour). The ratings of these companies remain under review with negative implications pending completion of the sale. (Please see below for a detailed listing of the companies and ratings.)

The affirmation of the group’s ratings reflects the group’s sound level of risk-adjusted capitalization and solid earnings derived from its generally profitable underwriting performance and steady investment earnings.

The ratings also consider the financial flexibility of OneBeacon U.S. and OneBeacon Ltd.

These positive rating factors are partially offset by the adverse development of prior years’ loss reserves related to the run-off business, the payment of significant shareholder dividends, which have constrained growth in surplus, and the elevated level of equity investments, which while well-managed, adds volatility to the group’s earnings and balance sheet.

The affirmation of the ratings of OneBeacon Ltd., OneBeacon U.S. and White Mountains acknowledges the companies’ strong financial flexibility and solid operating results generated through their operating subsidiaries. Financial leverage and interest coverage ratios are within A.M. Best’s guidelines for the ratings.

While the ratings for OneBeacon are stable, future positive rating actions may result from continued profitable underwriting and operating performance. However, negative rating actions could result if the operating performance falls markedly short of A.M. Best’s expectations or there is a weakening of its overall risk-adjusted capitalization.

The FSR of A (Excellent) and the ICRs of “a” have been affirmed for Atlantic Specialty Insurance Company and its following U.S. affiliates:

  • Homeland Insurance Company of New York
  • Homeland Insurance Company of Delaware
  • OBI National Insurance Company

The FSR of A (Excellent) and the ICRs of “a” have been affirmed for the following indirect subsidiaries of OneBeacon Insurance Group, Ltd. and remain under review with negative implications:

  • The Employers’ Fire Insurance Company
  • OneBeacon America Insurance Company
  • OneBeacon Insurance Company

The FSR of B++ (Good) and the ICRs of “bbb+” have been affirmed for the following indirect subsidiary of OneBeacon Insurance Group Ltd. and remain under review with negative implications:

  • Potomac Insurance Company

The following debt rating has been affirmed:

OneBeacon U.S. Holdings, Inc.-
– “bbb” on $275 million 4.60% senior unsecured notes, due 2022

The following indicative ratings under the shelf registration have been affirmed:

OneBeacon U.S. Holdings, Inc. and OneBeacon Insurance Group, Ltd.-
– “bbb” on senior unsecured debt
– “bbb-” on subordinated debt
– “bb+” on preferred stock

OneBeacon U.S. Holdings Trust I, II, III-
– “bb+” on preferred stock

The methodology used in determining these ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best’s rating process and contains the different rating criteria employed in the rating process. Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.

o Catastrophe Analysis in A.M. Best’s Ratings

o Insurance Holding Company and Debt Ratings

o Rating Members of Insurance Groups

o Risk Management and the Rating Process for Insurance Companies

o The Treatment of Terrorism Risk in the Rating Evaluation

o Understanding BCAR for Property/Casualty Insurers

o Analysis Insurance Holding Company Liquidity

o Equity Credit for Hybrid Securities

o Understanding Universal BCAR – A.M. Capital Adequacy Ratio for Insurers

A.M. Best Company is the world’s oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.

Copyright (c) 2014 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.

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